Cash incentives tempt current account switchers

Category:
Banking
12/04/2017

MONEYFACTS ARCHIVE

This article was correct at the time of publication. It is now over 6 months
old so the content may be out of date.

Current accounts have always been renowned for their perks, with many providers offering packaged accounts that can include benefits such as insurance add-ons, breakdown assistance and even free film or music downloads. However, they're now upping the ante even more, with many offering generous cash bonuses to entice new customers…

Encouraging switching

Since the launch of the Current Account Switch Guarantee in 2013, competition has been increasingly intense, and Moneyfacts has seen a sharp rise in the number of cash incentives being offered with current accounts – with some deals boasting sums of up to £220 a year.

Not only are such perks clearly designed to steal customers away from rival accounts, but the latest offers can provide customers with more cash upfront than they could earn in a whole year of saving with a standard savings account!

For example, the £150 that can currently be gained when switching to Yorkshire Bank's fee-free Current Account Direct could only be matched by a savings account paying an interest rate of 7.5% yearly on a £2,000 balance, something unheard of at present.

The table below shows some of the top switching incentives currently available, together with the kind of interest rate you'd need to be on to earn the equivalent amount of cash from a savings account, and as you can see, switching could seriously pay!

Selection of providers with switching cash incentives

Type of reward gained (cashback on switching / spending per month)

Cash earned in first year

Equivalent interest rate (based on £2,000)

M&S Bank Current Account

£100 (gift card) + an additional £10pm (a) (gift card) (£120pa)

£220

11.00%

Halifax Reward Current Account

£100 (switch) + £6.25pm gross (£75pa gross)

£175

8.75%

Yorkshire Bank Current Account Direct (b)

£150 (switch)

£150

7.50%

first direct 1st Account

£125 (switch)

£125

6.25%

HSBC Advance

£120 (switch)

£120

6.00%

The Co-operative Bank Current Account

Up to £4pm + £1.50pm on debit card spending (£66pa)

£66

3.30%

Barclays Bank Account

Blue Rewards £4pm (c) (£48pa)

£48

2.40%

(a) Dependent on minimum funding of account. (b) Account also offered by Clydesdale Bank. (c) Cash received after monthly fee of £3 taken – more rewards available if certain Barclays products are held.

Compiled 18.01.16

A savings boost

Given the amount of cash that can be earned simply by switching – often far more than you could earn in savings interest – could it be time to see what's on offer? It isn't only the cash incentives that can be beneficial, either, as with many accounts offering cashback or even high rates of in-credit interest, you could boost your savings even more.

"Current account providers are pulling out all the stops to grab the attention of new customers by rewarding switchers with a cash injection," said Rachel Springall, finance expert at Moneyfacts. "Thanks to this competition, savers who are struggling to get a decent return with standard savings accounts may be more than interested in what these providers have to offer."

Over 70,000 people switched their current account using the switch service in December, according to figures from Bacs, and as a new year begins, many consumers could be thinking about following in their footsteps – particularly if they're not overly impressed with the standard of service from their current banking provider.

"Some consumers may find that they're paying over the odds for their account or that they're not making the most of any add-ons," said Rachel, and in these instances, a quick switch could well be in order. Why not see the kind of accounts that are available? It's largely expected that competition between current account providers will continue this year, but there are some great deals already available, and some are limited-time only offers.

However, while it may be tempting to opt for the account that offers the biggest incentive, it's important to look beyond the initial deal, as Rachel explains: "While cash incentives shouldn't be ignored, customers should choose a current account based on its overall package to ensure it covers all their financial requirements. This is particularly important if they want a reasonable overdraft to cover any unexpected outgoings, otherwise they could end up being stung with excessive fees."